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DECREE No. 30/1998/ND-CP OF MAY 13, 1998 DETAILING THE IMPLEMENTATION OF THE LAW ON ENTERPRISE INCOME TAX

THE GOVERNMENT

Pursuant to the Law on Organization of the Government of September 30, 1992;

Pursuant to the Law No. 03/1997/QH9 on Enterprise Income Tax of May 10, 1997;

At the proposal of the Minister of Finance,

DECREES:

Chapter I

SCOPE OF APPLICATION OF THE ENTERPRISE INCOME TAX

Article 1.- Organizations and individuals engaged in goods production and trading and/or service provision with incomes subject to enterprise income tax include:

1. Organizations engaged in goods production and trading and/or service provision, including: State enterprises; limited liability companies; joint stock companies; foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam; foreign companies and organizations doing business in Vietnam not under the Law on Foreign Investment in Vietnam; private enterprises; cooperatives; cooperation groups, economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, people's armed forces units; administrative and non-business agencies that own organizations engaged in goods production and trading and/or service provision.

2. Vietnamese individuals engaged in goods production and trading and/or service provision, including:

a/ Individual business people and groups of business people;

b/ Households;

c/ Independent professionals: medical doctors, lawyers, accountants, auditors, painters, architects, musicians, and others;

d/ Individuals leasing such property as houses, land, means of transport, machinery and equipment or other kinds of property;

e/ Peasant households and individuals engaged in cultivation, husbandry and aquaculture with a commercial goods value of over 90 million VND/year and an income of over 36 million VND/year, shall have to pay enterprise income tax on income in excess of 36 million VND/year.

3. Foreign companies conducting business activities through their permanent establishments in Vietnam.

Foreign companies' permanent establishments in Vietnam are business establishments through which foreign companies conduct some or all of their income-generating business activities in Vietnam. Foreign companies' permanent establishments take the following forms:

a/ Branches, executive offices, factories, workshops, goods delivery warehouses, means of transport, mines, oil or gas fields, natural resource exploration and exploitation sites or equipment and facilities used for natural resource exploration;

b/ Construction sites: construction, installation or assembly works; activities of supervision of construction, installation or assembly works;

c/ Service provision establishments, including consultancy services provided by their employees or other objects;

d/ Foreign companies' agents;

e/ Representatives in Vietnam in the following cases:

- They are competent to sign contracts in the names of the foreign companies.

- They are not competent to sign contracts in the names of the foreign companies but regularly conduct goods delivery or provide services in Vietnam.

In cases where the double taxation avoidance agreements signed by the Socialist Republic of Vietnam otherwise provide for the permanent establishments, such agreements shall apply.

4. Foreign business people with incomes generated in Vietnam.

Article 2.- Non-payers of enterprise income tax include households, individuals, cooperation groups, agricultural cooperatives with incomes from cultivation, husbandry and aquaculture products, with the exception of peasant households and individual as defined in Clause 2, Article 1 of this Decree.

Chapter II

TAX CALCULATION BASES AND

TAX RATES

Article 3.- The turnover for calculating taxable income under Article 8 of the Law on Enterprise Income Tax are specified as follows:

1. For goods or services which are sold or provided by production and/or business establishments, it shall be the total sum earned from the goods sale and/or service provision, including price subsidies, surcharges and extra amounts earned by such production and/or business establishments. If the production and/or business establishments pay value-added tax directly on the added value, the turnover for calculating incomes shall also include the value-added tax.

2. For goods sold by installment payment, it shall be the turnover of the sold goods calculated according to the selling price paid in lump sum, excluding interests on deferred payment.

3. For goods and services used for exchange, as gifts or donations, it shall be calculated according to the selling prices of products, goods and services of the same or similar kinds at the time of the exchange, gift giving or donation.

4. For products for self-usage, it shall be the production costs of such products.

5. For goods processing, it shall be the earnings from the processing, including labor wages, costs of fuel, power, auxiliary materials and other costs in service of the goods processing.

6. For property leasing activities, it shall be the rentals collected in each period according to the leasing contracts. In cases where the lessees pay rentals in advance for several months or several years, the turnover shall be the total sum of money collected.

7. For credit activities, it shall be the interests on loans actually collected in the tax calculation period.

8. For other activities, it shall be stipulated by the Ministry of Finance.

Article 4.- The reasonable expenses that are allowed to be subtracted so as to calculate taxable incomes from production, business and/or service activities shall include:

1. Depreciation of immovable property used in production and business activities. The immovable property depreciation levels shall be prescribed by the Ministry of Finance.

2. Costs of raw materials, materials, fuel, energy and goods actually used in production, business and/or services related to the turnover and taxable incomes in a given period, which shall be calculated according to the reasonable waste norms and the actual ex-warehouse prices.

3. Salaries, wages, and other payments of the salary or wage nature to be paid to laborers, mid-shift meal allowances:

a/ Salaries, wages and other payments of the salary or wage nature to be paid to laborers in State enterprises in accordance with current regulations.

b/ Salaries, wages and other payments of the salary or wage nature to be paid to laborers in other business establishments according to labor contracts. For business establishments which have not yet applied the labor contract regime, salaries, wages and other payments of the salary or wage nature to be paid to laborers shall be accounted into the costs for calculating taxable income on the basis of the business line's average salary and wage levels in the localities.

The following expenses shall not be accounted into the expenses for salaries and wages:

- Salaries and wages of private enterprise owners or heads of production, business and/or service households.

- Salaries and wages of founding members of companies who do not directly run production, business or service activities.

c/ Expenses for laborers' mid-shift meals.

4. Expenses for scientific and technological research; innovations and technical improvements; financial support for education, health, labor training according to the prescribed regime.

5. Expenses for services purchased from outside: electricity, water, telephone, repair of immovable property, rentals of immovable property, auditing, property insurance, expenses for use of technical documents, patents, technology permits which are not regarded as immovable property, technical services.

6. Payments for women laborers as prescribed by law; labor protection expenses, security expenses; deductions for the social insurance and contributions to health insurance funds falling under the responsibility of labor-employing business establishments; trade union's budgets; deductions for forming the financial source to cover the high-level managerial costs as prescribed.

7. Payments of interests on the capital borrowed for production, business and service provision from banks, credit institutions at the actual interest rates; payments of interests on loans borrowed from other objects at the actual interest rates which, however, must not exceed the ceiling interest rate set by the State Bank of Vietnam applicable to credit institutions.

8. Deductions for setting up the reserves for the price decrease of unsold goods, for the price decrease of securities in financial activities and for bad debts.

9. Severance allowances for laborers as prescribed by law.

10. Expenses for the sale of goods and/or provisions of services including: expenses for packaging, transport, portage, warehouse, storing yard, product warranty.

11. Expenses for advertisements, marketing and sales promotion directly related to the production, business and service activities as well as other expenses which must not exceed the maximum level of seven per cent of the total expenses. For commercial activities, the total expenses used for determining such maximum level shall exclude the purchasing prices of sold goods.

The Ministry of Finance shall guide the maximum level for this expense appropriate to each business line.

12. Payable taxes, fees, charges and land rentals related to the production, business and service activities (except for the enterprise income tax), including:

- Export tax, special consumption tax, value-added tax (for business establishments which pay value-added tax directly on the added value); license tax; natural resource tax; agricultural land use levy; house and land tax;

- Road fees, bridge tolls and ferry tickets, airport charges, title-deed fees;

- Land rentals.

13. Business management costs allocated by foreign companies to their permanent establishments in Vietnam according to the proportion of the turnover of the permanent establishments to the total overseas turnover of their respective companies.

Article 5.- Turnovers and reasonable expenses shall be recorded in Vietnam dong in the accounting books of business establishments. In cases where a turnover or expenditure is made in a foreign currency, it must be converted into Vietnam dong at the exchange rate announced by the State Bank of Vietnam at the time of the foreign currency collection or spending.

Article 6.- The following expenditures shall not be accounted into the reasonable expenses:

1. Advance deductions to cover expenses but actually not spent, such as advance deductions to pay fees of overhaul, commercial goods or construction work warranty, and other advance deductions;

2. Expenditures without vouchers or with unlawful vouchers;

3. Fines such as fines on breaches of contracts, fines on violations of traffic rules, fines on violations of the business registration regulations, fines on violations of accounting and statistic regulations, fines on tax-related administrative violations and other fines;

4. Expenditures not related to turnovers and taxable income such as expenditures on capital construction investment, financial support for localities, mass organizations, social organizations, expenditures for charity purpose and others not related to turnovers and taxable income;

5. Expenditures covered by other funding sources such as non-business expenses, regular difficulty allowances, unexpected difficulty allowances.

Article 7.- Other taxable incomes include:

1. Differences between the purchase and sale of securities;

2. Income from the rights to property ownership or use;

a/ Income from the lease of property;

b/ Income from the intellectual property rights;

c/ Other income from the rights to property ownership or use.

3. Profits from the transfer or liquidation of property.

4. Interests on deposits or loans.

5. Differences earned from the sale of foreign currency(ies).

6. The year-end balances of the reserve for the price decrease of unsold goods, the reserve for the price decrease of securities and the reserve for bad debts.

7. Bad debts already written off from the accounting books but now recovered.

8. Amounts payable to unidentified creditors.

9. Previous years' omitted income from production, business and service but now discovered.

10. Incomes earned from overseas production, business and service activities.

For incomes for which income tax has been paid abroad, the business establishments shall have to determine the amounts of pre-tax overseas incomes so as to calculate the enterprise income tax.. When determining the income tax for the whole year, the income tax already paid abroad shall be subtracted. However, the subtracted tax amount must not exceed the income tax on income received from abroad, calculated according to the Law on Enterprise Income Tax.

11. Income related to the sale of goods and provisions of services not yet included in the turnovers, after subtracting expenses for the generation of such income as prescribed by the Ministry of Finance.

12. Other incomes.

Article 8.- For incomes earned from shares or capital contributions to joint ventures or economic cooperation (after tax), business establishments shall not have to pay enterprise income tax on such income but they must be included into the after-tax income for determining the income surtax.

Income from oil and gas business activities shall comply with the Government's stipulations.

Article 9.- The enterprise income tax rates applicable to domestic business establishments and foreign organizations and individuals doing business in Vietnam but not under the Law on Foreign Investment in Vietnam shall be as follows:

1. The universal tax rate is 32%.

2. The tax rate of 25% shall apply to the following business establishments for a period of three years from the effective date of the Law on Enterprise Income Tax:

- Mining, exploitation, minerals, forest products and aquatic products;

- Metallurgy and the manufacture of mechanical products;

- Manufacture of basic chemicals, fertilizers and insecticides;

- Production of construction materials (except for cement);

- Construction (except survey, designing, consultancy and supervision activities);

- Transport (except for air transport, taxi transport).

3. For business establishments that have convenient business locations, less competitive but highly profitable business lines, they shall have to pay both enterprise income tax at the rate of 32% and the surtax at the rate of 25% on their remaining incomes, which account for more than 12% of the existing capital (except for borrowed capital).

Income surtax shall not be collected temporarily for the following cases:

- Business establishments which enjoy the enterprise income tax rate of 25% for a period of three years from the effective date of the Law on Enterprise Income Tax as prescribed in Clause 2 of this Article;

- Investment projects in the fields, business lines and geographic areas where investment is encouraged and which enjoy enterprise income tax rates of 25%, 20% and 15% as prescribed in Clauses 4 and 5 of this Article;

- Production establishments which export more than 50% of their products or have an export turnover accounting for more than 50% of their total turnover.

4. For new investment projects in the fields and business lines eligible for investment preferences as stipulated by the Government, the tax rate of 25% shall apply.

5. For projects in the fields and business lines eligible for investment preferences, if they are located in the districts of ethnic minority people or mountainous, island or difficult areas as stipulated by the Government, the tax rate of 20%; shall apply and if they are located in high-mountain districts of ethnic minority people as stipulated by the Government, the tax rate of 15% shall apply.

Article 10.- Enterprise income tax rates applicable to foreign-invested enterprise and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam shall be as follows:

1. The universal tax rate is 25%.

2. The tax rate of 20% shall apply for a period of 10 years from the commencement of production and business activities to investment projects which satisfy one of the following criteria:

a/ Exporting at least 50% of their products;

b/ Employing 500 or more laborers;

c/ Raising or cultivating and processing agricultural products, forest products or aquatic products;

d/ Using advanced technologies, investing in research and development;

e/ Using large quantities of raw materials and materials available in Vietnam; effectively processing and exploiting natural resources in Vietnam; manufacturing products of highly localized contents.

3. The tax rate of 15% shall apply for a period of 12 years from the commencement of production and business activities to investment projects which satisfy one of the following criteria:

a/ Exporting at least 80% of their products;

b/ Investing in the fields of metallurgy, basic chemicals, mechanical engineering, petrochemicals, fertilizers and the manufacture of electronic components, automobile and motorcycle components;

c/ Building and commercially operating infrastructure projects (bridges, roads, water supply and drainage, electricity, ports);

d/ Growing perennial industrial plants;

e/ Investing in difficult areas (including hotel projects);

f/ Transferring property to the State of Vietnam without indemnity at the end of the operation duration (including hotel projects);

g/ Projects that satisfy two criteria in Clause 2 of this Article.

4. The tax rate of 10% shall apply for a period of 15 years from the commencement of production and business activities to the projects for:

a/ Building infrastructure in difficult areas;

b/ Investing in mountainous, island, remote or deep-lying areas;

c/ Afforestation;

d/ Other projects on the list of projects where investment is specially encouraged.

5. For investment projects under BOT, BTO and BT contracts, projects for building infrastructure of industrial parks or export processing zones, the preferential tax rates of 20%, 15% and 10% shall apply throughout the whole project implementation period.

6. The tax rates mentioned in Clauses 2, 3, 4 and 5 of this Article shall not apply to hotel projects (except for the cases of investment in difficult, mountainous or island areas, or transfer of property to the State of Vietnam without indemnity), financial, banking, insurance, service provision and commercial projects.

Article 11.- The enterprise income tax rate of 50% shall apply to Vietnamese and foreign individuals and organizations conducting oil and gas prospection, exploration and exploitation. Tax rates of 32% to 50% shall apply accordingly to projects and business establishments that exploit other rare and precious natural resources, depending on each project and each business establishment. The Ministry of Finance shall decide a specific rate for each of investment projects of Vietnamese organizations and individuals; the agencies competent to grant investment licenses shall decide a specific rate for each of foreign-invested projects, after obtaining the approval of the Ministry of Finance.

Article 12.- All incomes earned by foreign investors from their investment in Vietnam (including reimbursed income tax amounts and incomes from the capital transfers) which are either remitted abroad or kept outside Vietnam shall be liable to tax on income remittance abroad.

The abroad- income remittance tax rates shall apply as follows:

a/ The tax rate of 5% shall apply to foreign investors who make legal capital contributions or business cooperation capital contributions of 10 million USD or more and to overseas Vietnamese who invest in the country;

b/ The tax rate of 7% shall apply to foreign investors who make legal capital contributions or business cooperation capital contributions of from five to less than 10 million USD;

c/ The tax rate of 10% shall apply to foreign investors who make legal capital contributions or business cooperation capital contributions of less than five million USD.

Chapter III

TAX REGISTRATION, DECLARATION, PAYMENT AND SETTLEMENT

Article 13.- Business establishments shall have to register the enterprise income tax at the same time with the value-added tax. The tax registration procedures shall comply with Decree No. 28/1998/ND-CP of May 11, 1998 of the Government detailing the implementation of the Law on Value-Added Tax.

Article 14.- Business establishments shall have to declare and submit the declarations on the tax amounts to be temporarily paid for the whole year to the tax agency not later than the 25th day of January every year. The tax declaration form is set by the Ministry of Finance. If declarations of the tax amounts to be temporarily paid, for the whole year, are found to be without grounds, the tax agency shall be entitled to determine the tax amounts to be temporarily paid for each quarter and the whole year.

Article 15.- Any adjustments of the enterprise income tax amounts to be temporarily paid for each quarter and the whole year shall be effected only when there are major changes in the production and business. The tax agency that receives business establishments' requests to adjust the tax amounts to be temporarily paid for each quarter and the whole year shall have to check whether there are really major changes in the production and business; if so, notification must be made so as to adjust the temporarily-paid tax amounts in a suitable manner.

Article 16.- The General Department of Taxation shall guide the declaration for cases of turnover quotas and the taxable income-over-turnover ratios applicable to business establishments, which have not yet properly observed the regulations on accounting, invoices and vouchers as prescribed in Clause 2, Article 12 of the Law on Enterprise Income Tax as suited to each business line, each different district of the same province or city and each adjoining district of two provinces or cities.

Article 17.- The payment of enterprise income tax is prescribed as follows:

1. Business establishments shall have to temporarily pay the tax amounts for each quarter fully and on schedule to the State budget according to the tax agency's tax payment notices. The deadline for tax payment stated in such notices shall not be later than the last day of each quarter.

2. Business establishments which have not properly observed the regulations on accounting, invoices and vouchers shall have to pay a tax calculated according to the taxable income-over-turnover ratio on a monthly basis according to the tax agency's notices. The deadline for monthly tax payments stated in the notices shall not be later than the 25th day of the subsequent month.

3. Business establishments engaged in consignment trading shall have to declare and pay tax for each goods consignment to the tax agency of the locality where they buy goods before transporting the goods.

4. For foreign business organizations or individuals that have no permanent bases in Vietnam but have their incomes generated in the country, the organizations or individuals in Vietnam that pay such incomes shall have to deduct the tax amounts therefrom according to the Finance Ministry's guidance and remit them to the State budget simultaneously with the transfer of payments to the organizations or individuals abroad.

Article 18.- Enterprise income tax shall be calculated and paid in Vietnam dong.

Article 19.- Every year, business establishments shall have to settle enterprise income tax with the tax agency according to the form set by the Ministry of Finance.

The tax-settlement year shall coincide with the solar year. In cases where business establishments are permitted to apply a fiscal year other than the solar year, they shall be permitted to settle their tax according to such fiscal year.

A tax settlement must accurately and fully reflect the following:

1. The turnover.

2. The reasonable expenses.

3. The taxable incomes.

4. The income tax amounts to be paid.

5. The income tax amount already temporarily paid in the year.

6. The income tax amount already paid abroad for incomes received from abroad.

7. Income tax amount underpaid or overpaid.

Article 20.- Business establishments shall have to submit their tax settlement reports to the tax agency within 60 days from the end of the solar year or fiscal year and pay fully the underpaid tax amounts according to their settlement reports within 10 days from the date of submission of the settlement reports. If they overpay tax amounts, the excess amounts shall be deducted from the payable tax amounts for the subsequent period.

Article 21.- In the case of a merger, consolidation, division, splitting, dissolution or bankruptcy, business establishments still shall have to make tax settlements with the tax agency and send tax settlement reports within 45 days from the date of issue of the decision on the merger, consolidation, division, splitting, dissolution or bankruptcy.

Article 22.- After receiving the tax settlement reports, the tax agency shall have to examine them. It shall, when necessary, be allowed to conduct examination at the concerned business establishments. At the end of the examination, it must make reports thereon and propose handling measures.

Business establishments shall have to abide by the tax agency's examination reports.

Article 23.- In the course of examination of the tax settlement, if any unreasonable selling or purchasing prices or expenses of the business establishments is detected, the tax agency shall be entitled to re-determine them according to the foreign and domestic market prices so as to ensure the full and accurate collection of enterprise income tax.

Article 24.- The tax agency shall have the following tasks, powers and responsibilities:

1. Guiding business establishments to declare and pay tax in accordance with the Law on Enterprise Income Tax.

2. Notifying business establishments of the payable tax amounts and the tax payment deadlines as prescribed; past the tax payment deadlines stated in the notices if any business establishments fail to make tax payments, the tax agency shall continue to issue notices on the payable tax amounts as well as the fines on the late payment; if such business establishments still fail to pay the full tax amounts and fines according to its notices, the tax agency shall be entitled to apply or request a competent agency to apply handling measures prescribed in Clause 4, Article 24 of the Law on Enterprise Income Tax to ensure the full collection of the tax amounts and fines; if even after the above-mentioned handling measures have been applied the concerned business establishments still fail to pay the full tax amounts and fines, the tax agency shall refer the dossiers to the competent State agency for handling according to law.

3. Supervising and inspecting the business establishments' tax declarations, payments and settlements.

4. Handling tax-related administrative violations and settling tax-related complaints.

5. Requesting business establishments to supply accounting books, invoices, vouchers and other records related to tax calculation and payment; requesting credit institutions, banks and other organizations and individuals to supply documents related to tax calculation and payment.

6. Keeping and using data and documents supplied by business establishments and other objects according to the prescribed regime.

Article 25.- The tax agency shall be entitled to determine the taxable income for calculating tax to be paid by business establishments in the following cases:

1. Business establishments fail to observe or improperly observe the regulations on accounting, invoices and vouchers.

2. Business establishments fail to declare or improperly declare the tax calculation bases or fail to prove the bases stated in the declarations at the request of the tax agency.

3. Business establishments refuse to produce accounting books, invoices, documents and necessary documents related to the tax calculation.

4. Business establishments are detected to do business without business registration.

The tax agency shall base itself on the survey documents of the situation of the business establishments' business activities or on the taxable incomes of business establishments of the similar business scope in the same business line to set the taxable incomes.

In cases where business establishments disagree with the set taxable amounts, they shall be entitled to complain with the immediate higher-level tax agency, pending a solution, the complaining business establishments shall still have to pay the tax amounts as already set.

Chapter IV

ENTERPRISE INCOME TAX EXEMPTION AND REDUCTION

Article 26.- Newly-established domestic production establishments shall be exempt from enterprise income tax for the first two years from the time they have taxable income, then enjoy a 50% reduction of the payable enterprise income tax for two subsequent years. For newly-established production establishments in mountainous, island or difficult areas, they shall enjoy a tax reduction for two additional years.

Article 27.- Newly-established production establishments in the fields and business lines eligible for investment preferences stipulated by the Government shall enjoy tax exemption and/or reduction as follows:

1. For investment in districts outside the mountainous, island and other difficult areas, they shall enjoy income tax exemption for the first two years from the time the taxable income is generated and a 50% reduction of the payable income tax amount for three subsequent years.

2. For investment in districts of ethnic minority people or high mountain areas, they shall enjoy income tax exemption for the first four years from the time the taxable income is generated and a 50% reduction of the payable income tax amount for nine subsequent years.

3. For investment in districts of ethnic minority people or mountainous and island areas, they shall enjoy income tax exemption for the first four years from the time the taxable income is generated and a 50% reduction of the payable income tax amount for seven subsequent years.

4. For investment in difficult areas, they shall enjoy income tax exemption for the first three years from the time the taxable income is generated and a 50% reduction of the payable income tax amount for five subsequent years.

Article 28.- Newly-established business or service establishments in the business lines eligible for investment preferences according to the Government's stipulations shall enjoy tax exemption and/or reduction as follows:

1. For investment in districts outside mountainous, island and other difficult areas, they shall enjoy a 50% reduction of the payable income tax amount for the first two years from the time the taxable income is generated.

2. For investment in districts of ethnic minority people on high mountains, they shall enjoy income tax exemption for the first two years from the time the taxable income is generated and a 50% reduction of the payable income tax amount for five subsequent years.

3. For investment in districts of ethnic minority people or mountainous and island areas, they shall enjoy income tax exemption for the first two years from the time the taxable income is generated and a 50% reduction of the payable income tax amount for four subsequent years.

4. For investment in difficult areas, they shall enjoy income tax exemption for the first year from the time the taxable income is generated and a 50% reduction of the payable income tax amount for three subsequent years.

Article 29.- Domestic production establishments which invest in building new production lines, expanding the production scale, renewing technologies, improving the ecological environment or raising the production capacity, shall be exempt from the enterprise income tax on the increased income of the first year and enjoy a 50% reduction of the payable income tax amount on the income brought about by the new investment for two subsequent years.

The Ministry of Finance shall guide the determination of the increased income brought about by the new investment which enjoys tax exemption and/or reduction.

Article 30.- Domestic business establishments which move to mountainous, island or difficult areas shall be exempt from enterprise income tax for the first three years from the time the taxable income is generated.

Article 31.- The following incomes of domestic business establishments shall be exempt from enterprise income tax:

1. Income from the performance of scientific research contracts.

2. Income from the performance of technical service contracts in direct service of agriculture.

3. Income from production, business or service activities of business establishments exclusively reserved for disabled laborers.

4. Income from vocational training activities exclusively reserved for the disabled, ethnic minority people, children in especially difficult circumstances and victims of social vices.

5. Production, business or service households that have monthly average incomes in a year less than the minimum salary level prescribed by the State for State employees.

Article 32.- The enterprise income tax exemption and/or reduction for foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam shall be applied as follows:

1. Projects stated in Clause 2, Article 10 of this Decree shall enjoy income tax exemption for the first year from the time the taxable income is generated and a 50% reduction of the payable income tax amount for two subsequent years.

2. Projects stated in Clause 3, Article 10 of this Decree shall enjoy income tax exemption for the first two years from the time the taxable income is generated and a 50% reduction of the payable income tax amount for three subsequent years.

3. Projects stated in Clause 4, Article 10 of this Decree shall enjoy income tax exemption for the first four year from the time the taxable income is generated and a 50% reduction of the payable income tax amount for four subsequent years.

4. Afforestation projects and infrastructure construction projects in mountainous or island areas, and other projects where investment is specially encouraged shall be exempt from income tax for eight years from the time the taxable income is generated.

5. The above-mentioned tax exemption and reduction shall not apply to hotel projects (except for those in mountainous, island and difficult areas or those where property is transferred to the State of Vietnam without indemnity at the end of the operation duration) and investment projects in financial, banking, insurance, service provision and commercial fields.

Article 33.- The enterprise income tax shall be exempt and/or reduced for foreign investors in the following cases:

1. Overseas Vietnamese who invest in the country under the Law on Foreign Investment in Vietnam shall enjoy a 20% reduction of the payable income tax amount, except for cases where they enjoy an income tax rate of 10%).

2. Patents, technical know-how, technological processes and/or technical services as legal capital contributions.

3. Foreign investors shall be exempt from enterprise income tax in cases where they transfer their contributed capital to State enterprises or enterprises where the State holds predominant shares. They shall enjoy a 50% reduction of the enterprise income tax when they transfer their contributed capital to other Vietnamese enterprises.

Article 34.-

1. Foreign investors who use their dividends for reinvestment shall be refunded the enterprise income tax amounts already paid on the reinvested incomes if they meet the following conditions:

- Reinvesting in projects in the fields where investment is encouraged as stated in Article 10 of this Decree;

- Reinvested capital to be used for three or more years;

- Having fully contributed to the legal capital stated in the investment licenses.

2. The following is the level of reimbursed income tax on reinvested capital:

- 100% for projects mentioned in Clause 4, Article 10 of this Decree.

- 75% for projects mentioned in Clause 3, Article 10 of this Decree.

- 50% for projects mentioned in Clause 2, Article 10 of this Decree.

3. The Ministry of Finance shall prescribe the procedures and dossiers for consideration of income tax reimbursement and decide the income tax reimbursement.

Article 35.- Domestic business establishments and foreign-invested enterprises which operate in the production, construction or transport domains and employ from 10 to 100 women laborers and the number of women laborers accounts for more than 50% of total number of regular laborers or which regularly employ more than 100 women laborers accounting for over 30% of the total regular laborers in the enterprises, shall enjoy an income tax reduction equal to the increased expenses for women laborers.

The Ministry of Finance shall specify the increased expenses for women laborers as prescribed in this Article.

Article 36.- The tax exemption and/or reduction shall apply only to business establishments that have properly adhered to the accounting regulations and have paid taxes as declared.

The Ministry of Finance shall guide the tax exemption and reduction procedures and decide the tax exemption and/or reduction for domestic business establishments.

For foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam, the tax exemption and reduction shall be stated in the investment licenses granted by the competent agencies with the consent of the Ministry of Finance.

Article 37.- Domestic business establishments and foreign-invested enterprises, which find themselves suffer from losses after making settlement with the tax agency shall be entitled to carry forward such losses to subsequent years. Such losses shall be allowed to be deducted from the taxable incomes. The losses carry-forward period shall not exceed five years.

Chapter V

HANDLING OF VIOLATIONS

Article 38.- Tax payers, tax officials and other individuals who violate the Law on Enterprise Income Tax shall, depending on their acts and the seriousness of violation, be handled according to Article 24 and Article 26 of the Law on Enterprise Income Tax and other legal documents on the handling of administrative violations in the field of tax.

Article 39.- The tax agencies and tax officials that well fulfill their assigned tasks; organizations and individuals that record merits in the implementation of the Law on Enterprise Income Tax; and tax payers that well fulfill their tax obligations shall be commended according to the Government's stipulations.

Chapter VI

ORGANIZATION OF IMPLEMENTATION

Article 40.- This Decree takes effect from January 1st, 1999.

The settlement of profit tax-related matters before January 1st, 1999 shall comply with the provisions of the Law on Profit Tax, the Law Amending and Supplementing a Number of Articles of the Law on Profit Tax and the provisions on profit tax in other legal documents.

Article 41.- The Minister of Finance shall guide the implementation of this Decree.

The ministers, the heads of the ministerial-level agencies and agencies attached to the Government and the presidents of the People's Committees of the provinces and cities directly under the Central Government shall have to implement this Decree.

On behalf of the Government

For the Prime Minister

Deputy Prime Minister

NGUYEN TAN DUNG